Royal is a music NFT marketplace where fans can take ownership of their favorite songs.
DJ Justin Blau, aka 3LAU, performs at a music festival. Image source: Altamira Film
In 2014, Justin Blau played with the Winklevoss brothers in Mexico, and like a world-renowned DJ and producer, he turned down a job on Wall Street to pursue a career in music. That's when he became obsessed with Bitcoin.
"I was super excited," Blau told Protocol, "I just bought some and put it away."
Blau, whose stage name is "3LAU", was attracted by the promise of blockchain technology. Tyler Winklevoss and Cameron Winklevoss, already known as pioneers in cryptocurrency investing, bet on Bitcoin early after suing Mark Zuckerberg for creating Facebook, taking advantage of some of the damages won in their winnings. The year they met Blau, they founded Gemini, which is now one of the largest cryptocurrency markets. But Blau saw a different opportunity — to combine new technology with his passion.
As NFTs suddenly became a hot trend, so did his interest. "I'm very excited about the impact this will have on music," he says, "How music NFTs should manifest themselves in some form of ownership."
This led to the emergence of music market Royal, which plans to sell music rights as NFTs, founded by Blau and entrepreneur JD Ross. Blau and Ross plan to officially launch Royal later this month, and the service will allow users to buy shares in songs and earn royalties based on how popular the music is.
"As the song becomes more popular and the song starts generating more revenue, as the owner of the asset, you actually have the right to these royalty streams," Blau said.
What happens if an artist violates this agreement? Blau says that, as in the traditional music world, this could have legal consequences.
In an interview with Protocol, Blau talked about his journey from musician to entrepreneur, why he turned down BlackRock's job offer in favor of music, and how he worked with fans to explore new ways for musicians to make money through their work.
(This article has been edited for brevity.) )
How will Royal work? Let's say I'm a musician who creates some songs. I don't want to go to a major record label. How do I join in?
When we open up this platform to all artists, Royal will enable you to tokenize and monetize your finished musical compositions. Let's say you write five songs, and you can tag those songs and transfer ownership to your fans. These fans can pay for these tokens. Let's say these five songs have 100 limited editions per capital, and each one sells for $100. You're a small artist who can sell ownership of your music to your fans for $10,000 per song.
Artists whose existing songs are popular may ask for higher price points and may release more tokens. It all depends on how the artists want to price it. Essentially, it gives fans a unique ownership of the music.
What does it mean for fans to own music? We're talking about part of the work, right?
Artists distribute a percentage of royalty income from streaming. As a fan, if you own these assets, you can earn income from these streams because they create revenue for the artist. As the song became more popular, the song began to generate more revenue, and as the owner of the asset, you actually had the right to get these royalty streams.
Do I have to have cryptocurrency to participate?
In the long run, it's not. In the long run, you will be able to buy things in dollars. In the short term, the distribution of income may be in UNITs of USDC stablecoins. But we want everyone to be able to use it. Obviously, some of the assets we initially issued will be Ethereum-based assets that will actually be distributed for free. With my song about to be released, I'm going to give away 50% ownership of my next song to those on Royal. But in the future, you will be able to use multiple payment methods, and you don't need to know much about cryptocurrencies to get involved.
So every time the song is played, it generates revenue and then shares it with fans...
On Spotify, every 1 million traffic means $3,000 to $6,000, depending on the month. Depending on the rights the artist has, this is a very important part... In this case, I own all the rights to the song, so I can easily divide the copyright of the song equally with my fans. Every month I get a distribution from all the streaming services, and I only send half of them to a smart contract where each asset has ownership.
Whether or not I give ownership to my fans, mainstream streaming services pay me for streaming. I just take that money and allocate half of it to the fans. When they got to me, I paid them. It's similar to in the regular music world, if I work with collaborators and other artists — a singer, a lead singer, another DJ. Usually, if you're a major artist, you get paid first, and then you're obligated to pay those other artists. So in that regard, we see fans as collaborators on songs.
What if the artist doesn't deliver on the promised royalties?
Artists can choose not to pay their collaborators, but this could spark lawsuits.
Justin Blau has long been obsessed with Bitcoin. Later, he saw the potential of crypto in the music industry. Image source: Justin Blau
Let's take a step back. How did you discover the world of Bitcoin, blockchain, and NFT?
Yes, that's a good question. This is my favorite story to tell. During spring break in 2014, I met the Winklevoss brothers while working as a DJ in Mexico. I had just gotten close to Cameron and Tyler Winklevoss. They invited me to Los Angeles to join them for Grammy Week.
At the time they were creating Gemini, their exchange. That was the first time I discovered Bitcoin. I was super excited. I just bought some and put it away. It wasn't until 2017, when Ethereum was soaring, that I got involved again, beginning to explore the specific ways in which Ethereum could disrupt the world of entertainment. But the technology was too early at the time. Then I started an NFT project. It was basically a crypto festival project where you could scan qR codes and get collectible assets on the Stellar blockchain.
It worked, but we were in a bear market and the cost of the festival was too high. We eventually dropped the idea, even though it was a terrific demonstration of the collection on-chain, and I know fans are excited about it.
Fast forward to 2020, and NFTs appear in the form of art for the first time in a long time. I'm interested in what this means for music. That's when I started developing audiovisual NFTs and eventually decided that music NFTs should basically manifest themselves in some form of ownership. This is also the inspiration for Royal.
How did the conversation with the Winklevoss brothers influence your interest in Bitcoin and cryptocurrencies?
They're just huge fans of electronic music. This is not a direct conversation. It's more that I live in their house and they're just talking about it and I'm just curious. It's not like, "You should do it." You should go buy Bitcoin. "It's more that they're excited about it, discussing it with each other, and then I asked some questions.
You turned down BlackRock's job to pursue music. Can you talk about this decision to pursue a career in music?
When I was in college, I wanted to go to work in a bank or an asset management company. Thanks to the support of my work on web blogs and music sites, my web career is just getting started. And you know, the opportunity cost of not pursuing your passion is pretty high, especially when I've had some success. I really want to try it. So my economics professor at the time helped me convince my parents to let me work in music full-time. Since then, I've started working as a full-time DJ.
When I was a DJ, I studied finance in college, especially structured products and derivatives and things like that. For cryptocurrencies, once I start getting involved, I'm really involved. It's like the future of finance. The traditional banking system no longer makes sense, and I feel like I'm fully committed. So even though I've been doing DJs for the last decade, I've always been interested in elements of the financial world.
So, as a finance major, are you already familiar with Bitcoin and cryptocurrencies?
I heard about Bitcoin in 2012, but I didn't really get involved until 2014. It wasn't until last year that these DeFi protocols actually started running that I was involved in the DeFi world.
A few years have passed: you are now merging your interest in music with business. How did you explain it to your parents?
These days, of course, they are very excited. It's also what they've always expected to happen in my life, somehow merging my two passions.
Why was the platform named "Royal"?
The word Royal comes from "royalty". The background of the story is my co-founder JD Ross, who are college classmates. We've been friends for 11 years. JD founded another company called Opendoor, which is now public with a market capitalization of $12 billion. We were best friends in college, and when I was 19 he bought me a bottle of Crown Royal whiskey for me to play in the basement of his fraternity. So it also comes from this.
How will you measure success, especially after you've been through the festival business?
I think the environment is very different this time. The cost of capital interest on hosting a music festival is high. It's more of a digital product, so we have a lot of time to build it. I think our success metric is just sales.
Musicians want to get into NFTs, but there aren't as many ways to get them in. Music as an art form, relative to visual effects, is not symbolized. So we just wanted to create a platform that made sense for musicians. We hope that this platform is not only useful for local users of cryptocurrencies. We want it to be an entry point for new players in the cryptocurrency ecosystem.
Can you share some of your conversations with the artists? How do you explain Royal and the cryptocurrency world? What are their problems and concerns?
I would say that most artists actually understand it very quickly. I'm not using cryptocurrency terms, but in regular record trading terms. Rather than signing a record deal with a record label, you're basically making a deal with your fans.
Your fans are basically your record label. Fans make money through your music. They own a part of it. They will help market it. They share it with friends, and it's a more grassroots way to distribute and promote music than record labels. Artists seem to understand this very quickly.
What about fans? What kind of feedback did you get from them, and did you have any insights that were valuable to you?
Everyone on the chain seems to have a good acceptance of the concept of true IP ownership of music. If you browse my tweets, you'll see pretty amazing fan feedback that they're excited to make a more meaningful connection with the music they're listening to. Today, it is not correct to think that every listener contributes the same value. Some people extract more emotional value from a song than others, depending on how often they listen to it and where they listen to it. Some people walk onto the red carpet with songs at weddings, right? There's a lot of uncaptured power behind the music, and we just want to be able to bridge that gap.
Go a little deeper. What does this mean for the business model and ecosystem you're building?
There is no price discrimination between people who have different views on music. Let's say my friend is getting married and he wants to walk into the auditorium with one of my songs. Maybe they want to have a digital asset version of the song as a souvenir because they have a very close connection to the song. If they just play 100 times on Spotify, 1000 times, that will only generate a little gain. But they have a close relationship with the song, and they may want to get involved in the music in a very unique way. This type of buyer may be interested in the emotional meaning of owning these assets, just as someone wants to own CryptoPunk for emotional meaning or speculation.
That's the process we see, people will want to have their favorite songs. And when they have digital limited editions of these songs, it means a lot to them.
It's like having real records and vinyl records back then. People would collect vinyl records because it was tangible. This is an important way to collect music. Many times, if these vinyl records stop printing or are difficult to find, they will sell more expensive in the aftermarket. Just like anything else, creating digital scarcity around music will lead to a lot of really interesting market dynamics.
The music industry is becoming increasingly interested in this technology. Snoop Dogg will reportedly enter this space. How will you describe the competitive landscape and how will you respond?
We were the first to symbolize music on a large scale. I was contacted by Snoop Dogg's team at the time. Almost everyone came to me at the time. So, from a competitive landscape perspective, at Royal, our understanding of what the product and the world really wants is very broad. A lot of people are talking about the tokenization of music, but most people aren't talking about the tokenization of copyright and IP. I think that's what sets Royal apart from other projects.
What do you think of the push for regulation in cryptocurrencies, blockchain, and DeFi? What are you worried about when it comes to regulatory involvement?
I think most regulators have a very shallow understanding of actual technology, and it's important for experts to guide regulation. Regulation is important and beneficial in weeding out scammers and bad actors. But it can also hinder innovation. Therefore, it is important that Congress listens to experts in the field and does not make hasty decisions.
There are not many clear rules at present, and innovators need to have clear rules to really promote. I hope that clarity will come. We are fortunate to work with many great, trustworthy people in our field.